Chrysalis (CHRY) has announced that the sale of its entire holding in Featurespace to Visa, as announced on 26 September 2024 (click here to see our coverage of the original announcement), has now completed and all closing conditions have been satisfied. CHRY will shortly receive the initial cash proceeds of £79m with £11m deferred and held in escrow, as is typical of this type of transaction. CHRY’s investment in Featurespace was £29.5m and, as such, the proceeds received at completion represent a money multiple return of 2.7 times, and if the amount held in escrow is paid in full, this will increase to 3.0 times. Featurespace will become part of Visa’s Risk and Identity Solutions business, which CHRY says will enhance the provision of fraud protection services to Visa’s customers and consumers.

Liquidity and share buybacks

As of 18 December 2024, CHRY had liquidity of approximately £70m (which includes the drawdown of the £70m loan facility from Barclays Bank plc, as well as certain post year-end follow-on investments), comprising a position in Wise of approximately £3m, with cash and equivalents making up the balance. Receipt of initial proceeds from Featurespace will see this rise to approximately £149m.

CHRY has been undertaking a share buyback – with an initial target of £40m – funded by the proceeds from the sale of Graphcore earlier in the year. As of 18 December 2024, approximately 25m shares had been bought back into Treasury at a cost of approximately £23m, implying £17m of this initial tranche remains.

CHRY says that, with the initial proceeds from Featurespace now received, and given that sufficient capital is now in place to fund it, it intends to continue its capital return programme up to £100m, as soon as reasonably practicable. It adds that, at this moment, it is currently in a closed period and is unable to vary instructions to its brokers regarding buy-back quantum, beyond the £40m currently authorised. An increase in the capital return to up to £100m is as set out in the second element of the Company’s Capital Allocation Policy, which formed part of the continuation vote approved on 15 March 2024.

Comments from Nick Williamson and Richard Watts, managing partners of CHRY’s investment adviser

“Over the last sixteen years, Featurespace has built a suite of machine and deep-learning products to combat payments fraud and other financial crimes. From small beginnings, the company now protects 500 million consumers and 100,000 businesses globally and processes over 100 billion transactions per annum. This success is testament to Featurespace’s relentless innovation, ably guided by Martina King (CEO) and David Excell (Founder).

“This exit, at up to 3x invested capital, represents a strong return for our shareholders, and we wish the whole Featurespace team well as they start a new leg of their journey as part of Visa.

“Following the receipt of proceeds, we are delighted that the second element of the CAP is now fully funded, and that the Company will be able to continue to return capital to shareholders in advance of what we anticipate to be a successful Klarna IPO in the not-too-distant future.”